Present an itemised breakdown (and the total) for each of the following:

Q1. The Cash Flows at the start.

Q2. The Cash Flows over the life.

Q3. The Cash Flows at the end.

Q4. The NPV of the capital budgeting decision and a short explanation of your recommendation.

Congratulations, you were hired as a financial analyst for United Cruises following your studies at the University of Technology Sydney. United Cruises is a cruise ship service provider in the Australasian region. You fought off tough competition for the job, the recruitment team selected you for your personable character, analytical mind, ability to solve problems, and experience of working well in teams. You have really impressed senior management with your finance knowledge and ability to get the job done. As a result, the Chief Executive Officer (CEO) Margot Robbie and Chief Financial Officer (CFO) Rafael Nadal have asked you to perform a capital budgeting analysis of two new cruise ships, the King Voyager and Queen Spirit. The capital budgeting decision is whether United Cruises should purchase both cruise ships today in 2020 (Note: The decision is that United Cruises either buys both cruise ships, or they do not buy any cruise ships at all). In order to conduct your analysis you will need to collect information from different departments of the firm. Beyonce Drake from the accounting department and Dwayne Johnson from the sales department have helped you obtain information from various departments. The information that you have collected is detailed in the numbered paragraphs below. It is your job as a financial analyst to decipher which information is relevant to the capital budgeting analysis. Upon completion, you will present your analysis to Senior Management who will approve/decline investment in the new cruise ships. Information gathered from various departments:

1. United Cruises is a medium-sized Australian cruise experience provider. United Cruises will purchase the King Voyager and Queen Spirit immediately. The cost of the King Voyager is $45 million, and the Queen Spirit costs $42 million. The King Voyager will provide a cruise experience from Sydney to South Island New Zealand. The Queen Spirit will provide a cruise experience from Sydney to North Island New Zealand. The plan is to sell the King Voyager and Queen Spirit in ten years' time. The required rate of return for the King Voyager and Queen Spirit investment project is 9%.

2. United Cruises will borrow $87 million from Macquarie Bank to fund the purchase of the King Voyager and Queen Spirit cruise ships. Beyonce creates an amortisation schedule that indicates that the yearly principal and interest repayments on the debt are $10 million.

3. United Cruises has been operating since 2010. The two existing cruise ships in the United Cruises fleet include the Duke Magic and Princess Platinum. Both of these cruise ships were purchased five years ago, and are being depreciated over a 25-year life. Margot wants the King Voyager and Queen Spirit to be depreciated over a 35-year life because these new cruise ships are more modern and larger than the existing cruise ships in the United Cruises fleet.

4. To navigate in and around the coast of New Zealand, both the King Voyager and the Queen Spirit need to be fitted with a special propeller. For example, the special propeller allows the Queen Spirit to navigate in and around the narrow ports in Auckland and Wellington. The special propeller allows the King Voyager to navigate in and around Milford Sound (one of New Zealand's most popular tourist attractions). According to an email from Beyonce, United Cruises has two idle special propellers currently stored in their Balmain premises. The two idle special propellers were purchased nine years ago for $3 million each, both special propellers are compatible with either the King Voyager and Queen Spirit cruise ships, and both propellers have been written off for tax purposes. Forecasts from the accounting department indicate that each special propeller will be worthless 10 years from today. According to the International Sea and Port Authority each special propeller currently has a market value of $1,440,000. Hint: If an operating expense is incurred in Year 0, then you can record the tax deduction in Year 0.

5. The King Voyager and Queen Spirit cruise ships will each require spare parts inventory of $2.50 million immediately, will each require operating inventory of $3 million immediately, and will each incur maintenance expenses of $1.60 million per annum during the life of the project. The cost of replenishing spare parts inventory and operating inventory is included in the annual $1.60 million maintenance expenses incurred to operate each new cruise ship.

6. United Cruises total insurance yearly expenses is expected to increase by $3.22 million to $6 million from the introduction of the King Voyager and the Queen Spirit. Based on forecasts, annual insurance expenses relating to the King Voyager and Queen Spirit will increase by 0.5% every following year. Hint: assume that all operating cash flows occur at the end of the year, unless specified otherwise.

7. United Cruises paid $55,000 to Boomerang Marketing Group for market research investigating the demand for the new ships (i.e., King Voyager and Queen Spirit). The $55,000 fee was paid three months ago. United Cruises received the market research report from Boomerang Marketing Group two months ago. The report indicates that customers with the following characteristics are most interested in the new cruises offered by United Cruises:

Age: 35-65

Couples: Yes

Family with children: Yes

Salary before tax: $85,000

Popular reasons to visit New Zealand: Milford Sound. Skiing. Queenstown

Popular months to travel: December - February

Beyonce Drake suggests that the market research fee be included as an opportunity cost incurred in Year 0 of the King Voyager and Queen Spirit investment decision.

8. To ensure that customers get the premium experience on the King Voyager and Queen Spirit, a periodic $2.90 million "Premium Overhaul" per cruise ship is required every four years. The overhaul will update the customer cabins with new beds, bathrooms, and electronic appliances. The first "Premium Overhaul" for both cruise ships will occur at the end of Year 4.

9. Customers board all United Cruises at the Overseas Passenger Terminal in Circular Quay Sydney. The King Voyager and Queen Spirit will together increase total annual port charges for United Cruises from $1.45 million to $1.98 million. The port charges can be claimed as a tax deduction. The introduction of the King Voyager and the Queen Spirit will increase the total yearly fuel expense for United Cruises by $4.65 million to $7 million.

10. You receive a dossier which contains Table 1 (below) summarising relevant sales, food and drink costs, and crew costs (this data controls for seasonal patterns):